The money collected through taxation is called tax.

TAX is defined as
the lifeblood of the state. It is an enforced proportional contribution levied by
the law making body of the state to raise revenue to support the
indispensable and all the necessary expenses of the government. It is
enforced in the sense that it is mandated by the law to those who are
covered by it. It is also proportional because theoretically, it is proportioned
as to the ability of the person to pay through a certain rule of apportionment.
It is to raise revenue where the heart of taxation is to earn income for the
government.
Our country is currently in the phase of development trying to enhance
the lives of its people. In relation, there must be an effective system devised
to ensure that the government is collecting enough money to support its
expenditures. As of today, there is a big fiscal problem that our economy is
facing and the government needs to effectively collect and manage its
revenue.
National Tax Law
The 1987 Philippine Constitution sets limitations on the exercise of the
power to tax. The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation. (Article VI, Section
28, paragraph 1)

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

All money collected on any tax levied for a special purpose shall be
treated as a special fund and paid out for such purpose only. If the purpose
for which a special fund was created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the general funds of the Government.
(Article VI, Section 29, paragraph 3).
The Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restriction as it may
impose, tariff rates, import and export quotas, tonnage and wharf age dues,
and other duties or imposts within the framework of the national
development program of the Government (Article VI, Section 28, paragraph
2).
The President shall have the power to veto any particular item or
items in an appropriation, revenue or tariff bill, but the veto shall not affect
the item or items to which he does not object. (Article VI, Section 27, second
paragraph).
The Supreme Court shall have the power to review, revise, reverse,
modify or affirm on appeal or certiorari, as the law or the Rules of Court may
provide, final judgments and orders of lower courts in all cases involving the
legality of any tax, impost, assessment, or toll or any penalty imposed in
relation thereto. (Article VIII, Section 5, paragraph).

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

National Internal Revenue Code. This code underwent substantial

revision with passage of the Tax Reform Act of 1997. This law took effect on
January 1, 1998. Taxation is administered through the Bureau of Internal
Revenue which comes under the Department of Finance. The chief executive
of the Bureau of Internal Revenue is the Commissioner who has exclusive
and original jurisdiction to interpret the provisions of the code and other tax
laws.

The

commissioner

also

has

the

powers

to

decide

disputed

assessments, grant refunds of taxes, fees and other charges and penalties,
modify payment of any internal revenue tax and abate or cancel a tax
liability. Taxpayers can appeal decisions by the Commissioner directly to the
Court of Tax Appeals.
Local Government Tax Law
Local government taxation in the Philippines is based on the
constitutional grant of the power to tax to the local governments. Local taxes
may be imposed, as the Constitution grants, to each local government unit,
the power to create its own sources of revenues and to levy taxes, fees, and
charges which shall accrue to the local governments (Article X, Section 5).
With respect to national taxes, local Government units shall have a just
share, as determined by law, in the national taxes which shall be
automatically released to them (Article X, Section 6). Local government
taxation and other fiscal matters are contained in Book II of the Local
Government Code. These include real property taxation, shares of local
A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

governments in the proceeds of national taxes, credit financing and local

budgets including property and supply management.
Fundamental Principles of LGU Tax Powers
(a) Taxation shall be uniform in each local government unit;
(b) Taxes, fees, charges and other impositions shall:
1. be equitable and based as far as practicable on the taxpayer's
ability to pay;
2. be levied and collected only for public purposes;
3. not be unjust, excessive, oppressive, or confiscatory;
4. not be contrary to law, public policy, national economic policy,
or in restraint of trade;
(c) The collection of local taxes, fees, charges and other impositions
shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of this Code shall
inure solely to the benefit of, and be subject to disposition by, the local
government unit levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and,
(e) Each local government unit shall, as far as practicable, evolve a
progressive system of taxation.

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

If we will review the tax laws or tax system of the Philippines, it is

viewed by some as a complicated system. Our countrys existing tax
structure, where different tax rates are imposed on different income levels
and on different industries, could be one of the reasons hampering the full
potentials of revenue collection by the government.
It is also to be observed that under the countrys tax system, the more
advanced business sectors
companies,

are, such as those composed of multinational

the higher the tax

while the less progressive ones such as

agriculture were taxed much less. In this case, people will not pursue
advancement and modernization because it would mean higher taxes on
their business.
Graft and corruption is also one of the main reasons why most Filipinos
would rather not pay their taxes because they think that the money they are
paying will just unfortunately end up in the pockets of these corrupt
government officials.
Tax in the Philippines doesnt only concern business owners, but it also
involves almost every Filipino citizen and every resident of the country.
Employees who are earning salaries and wages are usually taxed through
withholding of their tax on compensation by their employers. Also,
employees are not allowed to claim most of their expenses related to their
employment as deductions to their taxable income, like transportation,
A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

communication and food allowance, unlike business owners who can claim
an allowable deduction to income tax from their expenses that are directly
related to their business.
The imposition of Value Added Tax and other indirect taxes on certain
goods and services also affect most of us. Since VAT is a form of sales tax
and an indirect tax, which may be shifted or passed on to buyers of goods,
properties or services, consumers may shoulder VAT. This means that even
the children who are buying and consuming candies, in which, price are
subjected to VAT, will carry the burden of tax.
But tax is tax, and it is the lifeblood of our country. It is under the law
of our land that deserves obedience. Thus, no matter how burdensome it is,
we always have to respect it and do our duties as a good citizen or a faithful
taxpayer.

THE NEED OF REFORM

As our country is in a serious fiscal problem, the low -yielding,
complicated and inflexible tax system needs a major overhaul. The focus of
the reform program should be: (a) heavier reliance on corrective taxes; (b)
higher rate and broader VAT base, (c) rationalization of fiscal incentives, and
(d) flat and lower income taxes.

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

Higher corrective taxation. The share of taxes on cigarettes, liquor and

petroleum products to total taxes has progressively shrunk. By imposing
higher taxes on cigarettes, liquor and petroleum products, the government
would be able to raise higher revenues with minimum deadweight loss and
at the same time correct the negative externalities associated with the use
of these commodities.

Higher and broader VAT base. The Philippine VAT system has been
severely weakened by Republic Act 8241 which limited considerably the VAT
base. The focus of the next round of tax reforms is to broaden the base by
recovering what was lost in 1996, expand in other areas, and increase the
VAT tax rates gradually from 10 percent to 12 percent and eventually to 14
percent. Proposals to introduce multi-tier VAT system in the Philippines
should be rejected because it will unnecessarily introduce complexity for the
administrative weak tax collecting machinery.

Rationalizing fiscal incentives. This is perhaps the most important

component of the 1997 tax reform program but was not legislated. The tax
base has become narrower as a result of many tax laws passed in recent
years. The existence of too many tax incentive laws has increased foregone
revenues,

complicated

tax

administration,

and

provided

greater

opportunities for special-interest deal-making.

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

Flat and lower income taxes. After achieving higher revenue yield from
corrective taxation, improved VAT system and rationalization of incentives,
the government may then consider joining the flat-tax bandwagon. The flat
tax may replace both the personal income tax and corporate income tax. It is
already working in Hong Kong and many former communist nations like
Estonia, Lithuania, Latvia, Russia, and the list of countries that has adopted
flat tax has grown. The most progressive income tax system has also been
the most complicated to implement. One of the advantages of the flat tax is
the ease by which it can be administered.
By making our countrys tax system simpler, it may reduce the the tax
obligation of some sectors but the simplified scheme would make it easier for
everyone to pay taxes, thus encourage tax compliance and increase revenue
collection. It may reduce tax rates but it can lead to an increased overall
collection.
It is also ideal to impose the same tax rates on different sectors. This
will encourage those who are still not modernized industries to pursue
advancement because same tax is imposed whether advanced or not.
The government should also impose stricter policies relating to graft
and corruption so as to show the public that the money they paid is worth
paying for. Public officials should be held accountable for the right or wrong
handling of revenues generated from tax-collections. Those who have

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas

committed bribery or mishandled the said revenues should be penalized for

graft and corruption.
Lastly, our government must also take into action the need for stricter
implementation of rules like in cases of the many tax-evaders in our country.
These tax evaders cause economic problems and must therefore be
penalized to discourage them from doing so.
As a result, our country will have a better tax system and these should
lead to solving the fiscal problems of our country and uplift the life of the
Filipinos.

A Critic on the topic: Major Taxes in the Philippines: Some Reform Areas